You just went under contract- CONGRATS!

The buyer has a finance contingency so you’ll have a couple extra hurdles than if they were paying cash. One of the biggest will be the appraisal, especially if you have the largest/most expensive house in your neighborhood. Let’s look at some of the factors certified appraisers look at and use to determine value:

  • Square footage- not necessarily how many bedrooms.
  • Condition of home- 6 categories ranging from new construction to substantial damage. Click here to read more about those categories.
  • Comparables- they use the closest 3, within the last 90 days within 1 mile radius.
  • Market conditions- is the market in an up or downswing.

What to expect during your appraisal appointment: They’ll call a day or 2 in advance to schedule a time. They’ll take interior/exterior photos, measure the entire house, if an FHA loan they will look in the attic, walk the exterior of the property, and take lots of notes. Don’t get in their way. They often have 2-3 appointments that day and don’t have the time to chit chat. Don’t try to sell them on your price, they follow a very strict set of guidelines and determine the value after hours of research when they get back to the office. They certainly do not come up with a value while they’re in the house, so don’t ask.

What happens if the appraisal comes in lower than the agreed purchase price?
This is never a fun situation, but you have 4 options:

1. You can reduce the price to what the appraisal says (most likely).
2. The buyer can pay the difference in cash since the bank won’t lend it (least likely).
3. You split it.
4. The deal is dead.

If it’s clear the house is worth what you agreed on, you can dispute it or the buyer can go to a different lender and start the process all over again (not completely uncommon, but a huge time suck and if it’s not FHA financing will need to pay for another appraisal at $400-500). There’s no set solution, it’s whatever the buyer and seller come to agree on.

What happens if the appraisal comes in higher than the agreed purchase price?
You likely will never know if it came in higher than the contract price. Generally, it’s either good (and you don’t know the appraised value) or it’s bad and the buyer’s agent tells you what it appraised at to start the solution. The appraisal is the buyer’s report, they paid for it, you don’t get to see it.

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Originally from Cornwall NY, Heather grew up cleaning her parents rental apartments and learning about real estate at a young age. She found her way to SWFL in her 20's and bought her first rental property at 25. After meeting with agents to list a property for sale, she began analyzing the commission scale for listing agents and didn't agree with the model. The journey began in 2014, in between working for a large real estate investment education company, working as a real estate agent for a large local brokerage, and managing her own investments in SWFL, she began to develop the Listed Realty secret sauce- professional full service and a flat listing fee.

Industry passion fueled by a strong work ethic and an itch to always do the right thing makes for a successful broker you want on your side!

Heather Termini
(239) 851-4041

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